That’s the takeaway from a special budget meeting Tuesday, when members of the Farmington City Council met with Finance Director Chris Weber and City Manager David Murphy to review the city’s financial outlook for the next five years.

Currently, Farmington is operating at a break-even point, which means there isn’t much money to invest in capital improvements. That wasn’t always the case. Two years ago, Murphy said, all the extra money was going to be put into the capital improvements fund so the city could invest in some major projects.

That plan changed when a new set of payments kicked in: city employee pensions, which will add an extra $100,000 annually to the city budget from this year through 2020.

The uptick comes in the wake of changes by MERS (Municipal Employees’ Retirement System), which handles city pensions. How much the city is required to set aside for pensions depends on factors such as life expectancy, retirement age and MERS’ investment predictions, recently lowered from 8 percent to 7¾ percent.

The city also has to pay it off quicker, in 15 years, as opposed to 30. Plus, since people today are living longer than they did 30 or 40 years ago, MERS has updated its life expectancy charts. Most city retirees get lifelong pensions, so the city now has to budget extra funding to cover the age difference.

Weber said the increased expenses are putting a “big squeeze” on city operations. For the fiscal year 2015-16, revenue in the general fund — the city’s main operating budget — exceeded expenses by almost $30,000. That’s set to reverse course pretty quickly. This year, Weber predicts, the city will be over budget to the tune of $43,000. If Farmington stays on its current course, the amount increases to $137,450 in 2017-18, $143,800 in 2018-19, then 195,000, 320,500 and, finally 394,000 in 2021-22.

There’s really no way to circumvent the pension funding — Mayor Bill Galvin mentioned a buyout, but that might prove even more expensive — so in order to offset the costs, Farmington needs to create more revenue elsewhere.

Currently, the city’s largest source of revenue is property taxes. Taxable value is predicted to rise by only 1-2 percent a year — not enough to deal with the pension costs. Galvin cited former Michigan Treasurer Rob Kleine, who said at a Michigan Municipal League meeting last year that communities need to build new construction to create new tax revenue.

Farmington has several big developments in the works, including Flanders (estimated to come on the tax rolls in fiscal 2017-18), the former Kmart property (2018-19), the 47th District Courthouse property on 10 Mile (2018-19), the hilltop school property near Our Lady of Sorrows (2019-20) and the old SWOCC site (2018-19).

Council member Steve Schneemann wasn’t sure about those dates, calling some of the estimates “pretty unlikely.” A sale of the courthouse property fell through this summer, after a developer backed out because the adjacent hilltop property didn’t become available for sale, as was originally hoped.

Murphy said that although the budget numbers look “a little bleak ... we’re doing a heck of a lot better than a lot of municipalities.” Other older communities, like Wayne, Redford and Ecorse, are going to be doing a lot worse when the pension payments hit, he said, because they’re already built out, with no room for new development.

Farmington’s looming budget shortfall means there’s nothing set aside for capital improvements, like parking lots and parks. Galvin brought up the potential of private sector investment to cover these kinds of projects. “We cannot continue to say increasing taxes is always the solution,” he said.

Murphy wasn’t about to panic. Farmington does have a fund balance of around $2 million, although some of it is already designated for certain uses. “There are challenges ahead," he said, “but it’s not the end of the world.”